“Friday’s data will be the apex of this week,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “The economic numbers are still not amazingly strong.”
The ISM’s manufacturing index climbed to a three-month high of 50.9 from 49 in May, the Tempe, Arizona-based group said today. The median forecast of 85 economists surveyed by Bloomberg called for the measure to rise to 50.5. A reading of 50 is the dividing line between expansion and contraction.
Investors who poured $1.26 trillion into bond funds in the past six years pulled out record amounts of cash last month, leaving the world’s biggest fixed-income managers struggling to stem the flow.
The funds saw $61.7 billion of withdrawals as money market mutual-fund assets rose $8.17 billion in the week ended June 25, according to TrimTabs Investment Research and the Money Fund Report.
Bank of America Merrill Lynch’s Global Broad Market Index dropped 2.9% in the past two months, the most since the inception of the daily gauge in 1996, as Bernanke laid out possibilities for reducing the $85 billion in monthly bond purchases supporting the economy.
Market bears say losses are just getting started because yields barely exceed inflation, leaving little relative value in bonds as the global economy improves. Pacific Investment Management Co., BlackRock Inc. and DoubleLine Capital LP, which together oversee about $6 trillion in assets, said the worst is already over because the securities are fairly valued.
“We are at a definite inflection point,” Richard Schlanger, who helps invest $20 billion in fixed-income securities as a vice president at Pioneer Investments in Boston, said in an interview on June 28. “If this thing continues in this vein, people are going to throw in the towel and you’re going to get this pain trade. And the markets can’t take it. They’d rather see a gradual rise in short-term rates versus a precipitous rise.”